Responding to a Small Claims Court claim against your business

Last post: Nov 7, 2018

What do you do if someone takes a Small Claims Court claim against your business? This is a practical guide to what you should expect and how you proceed.

If a creditor claims
your business owes a contractual debt and you have not paid within a certain
timeframe, it is likely they will issue proceedings against you in the County
Court. These days it's a relatively quick and easy process to file a claim
online and pay a small fee, to have County Court stamped papers land on the
doorstep.

So what do you do if
you are on the receiving end of those papers?

Firstly – were you aware the claim was being made? Creditors are encouraged to
follow a 'pre-action protocol' for business to business debt claims. You should
have received a 'letter of claim' which ought to have included a minimum set of
information and a reasonable timeframe for you to respond. If you have not received
this, it is worth highlighting this as there may be costs consequences for the other side.

Secondly – act fast. You will have 14 days to file an 'acknowledgement of
service form' which allows you a further 14 days in which to file a defence. At
this stage it is worth seeking legal advice, particularly if your claim exceeds
the £10,000 threshold (claims exceeding this amount put you at risk of paying
the other party's legal costs if the matter proceeds and you lose the case). A
legal professional can advise you on the merits of your case and whether you
have a chance of defending the claim.

If you ignore the claim the other side can ask the court to file a judgment
against you for the sums claimed, together with interest and costs. You will then
receive a County Court Judgment.

Case allocation – after the claim and defence is filed, both
parties will receive notification from the court of the 'track allocation' (ie -
small claims or fast track) and a possible hearing date. The court may give the
parties directions to progress the case within certain timescales. Pay
attention to any court notices - it is relatively inexcusable to miss a court
deadline and certainly a court hearing.

Court hearing – your 'day in court' is likely to be one of a number of hearings the
Judge hears that day – rather like a GP, they have a list of appointments to
get through. They are interested in finding out the relevant facts and applying the law. It may surprise you that
Judges are not usually interested in the war
and peace edit of your historical business relationship. This may seem
unfair from your point of view, but this is part and parcel of the court
process. Lawyers often advise to settle out of court beforehand, to avoid what
is termed as the 'litigation risk' of the court room.

Costs – If you lose, you may have to pay a proportion of the other side's legal
costs, in addition to the debt owed (and possibly interest). In the small
claims track, recoverable costs are rare unless the other side can show you
acted unreasonably in defending the claim or bringing the claim.

Judgment – If a County Court Judgment (CCJ) is made against you, it will specify
the timeframe in which you should pay. If you fail to adhere to the terms, the
creditor can ask the court to enforce the debt. For example, the creditor may
apply for a bailiff's appointment and ask the court to issue a Warrant of
Execution. Alternatively, the creditor may apply to the Court for a charging
order against an asset.

This is a very brief
guide to the journey of a county court claim in the small claims track. If a
claim is issued against your business and you think that money is owed, it is
worth your while trying to settle any dispute before court proceedings are
started. Think about a payment plan with your creditor if you need time to pay,
or look at alternatives, to avoid the risk of a county court claim.

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